FINRA Expungement Award:

Pennsylvania Advisor Clears His Records Of FINRA Disclosures

 

FINRA Expungement Award:

Pennsylvania Advisor Clears His Records Of FINRA Disclosures


 

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Award Date: February 10, 2022
Hearing Site: Philadelphia, Pennsylvania
Respondent Firm: Merrill Lynch, Pierce, Fenner & Smith Incorporated
Claimant Representative: Harris Freedman, J.D., and Dochtor Kennedy, MBA, J.D.


Case Objective:

An advisor in Pennsylvania had been in the financial services industry with Merrill Lynch for nearly 30 years. Two customer disputes — each of which arose after unprecedented market turmoil — had been sitting on his record for 13 and 21 years, respectively. Ready to remove the stains from his records and restore his public reputation to be representative of his conduct, the advisor hired AdvisorLaw to take him through FINRA’s arbitration process.


Case Summary:

The first dispute arose after a technology fund lost value amid the precipitous decline in the technology sector around 2000. The advisor had recommended the fund in 1999 to a customer who was about 70 years of age at the time. The customer wanted some growth investments, and she owned an existing fund from the same family that she could exchange for the recommended fund without incurring any fees. About two years later, after the markets declined, the customer alleged that the recommendation had not been appropriate for her age.



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The second dispute was lodged following the 2008 financial crisis. The customer owned a diverse portfolio that consisted of a variety of investments. She was averse to risk and often expressed concern to the advisor regarding price fluctuation, despite the fact that many of her investments were fixed and guaranteed. In 2004, about two years into the relationship, the customer began to require more and more income from her portfolio to assist with her daughter’s finances. The advisor continuously made recommendations that were in line with the customer’s investor profile and met her objectives. However, after the customer’s overall portfolio declined with the markets in 2008 and 2009, the customer filed for FINRA arbitration, alleging unsuitability and misrepresentation. She sought damages of half a million dollars, and the firm was able to settle for just over $22,000.


Result:

In the FINRA Dispute Resolution hearing, Harris Freedman, J.D., and Dochtor Kennedy, MBA, J.D. were able to successfully illustrate to the Arbitrator that the claims, allegations, or information in both disputes was false. The Arbitrator saw that the advisor’s recommendations for the first customer had been “consistent with the customer’s investor profile and in accordance with her specific request for a growth investment.” He pointed out that the disputed investment “represented only 3.6% of the customer’s portfolio and did not materially change the conservative makeup of the portfolio[,] while adding a small growth component as the customer requested,” and that the advisor had not received any compensation for the transaction.

Regarding the second dispute, the Arbitrator stated that the advisor testified that he had explained the details of his recommendations to the customer and provided written materials and that “[t]he customer acknowledged her understanding of the details and authorized the investments.” The Arbitrator saw that the “[i]nvestment recommendations were made in accordance with the customer’s risk profile…and specific requests.” The fact that the settlement had been a fraction of the amount sought was also noted in the Arbitrator’s decision.

Finding both claims to be false, the Arbitrator recommended expungement. As the advisor had no other disputes on his record, he will soon have a spotless BrokerCheck profile and a clean CRD report.




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